Everyone is aware that income is earned in Year 1 and assessed to tax only after the completion of Year 1 i.e. in the next Year; Year 2. That’s why Income Tax Department uses the term Assessment Year almost everywhere.
But few cases are exceptions to this basic rule of Income Tax. They are earned and assessed to tax in the same year. Such concept is introduced to protect the interest of revenue. It appeared to the Government that there were a few instances where either the assessee was not available in the assessment year or there was no assessee left to be assessed.
Five such cases are listed below:
- Section 172 : Shipping business income of non-resident ship-owners
- Section 174: In cases of persons leaving India
- Section 174A: Assessment of any association of persons, body of individuals or Artificial Juridical person formed or established only for a limited period
- Section 175: In case of persons who are likely to transfer their assets to avoid tax
- Section 176: In case of discontinued business
1. Shipping business income of non-resident ship-owners [Section-172]
In case a non-resident shipping company, which has no representative in India, earns income by carrying passengers, livestock, mail or goods loaded from any Indian port, such ship will not be allowed to leave the port till the tax on such income has been paid or alternative arrangements to pay tax are made. As such income is assessed to tax at current year’s rates.
7½% of the amount received or amount receivable by the ship-owners or charters as fare/freight (including amount on account of demurrage charge or handling charge) shall be deemed to be the income accruing in India on account of such carriage.
The master of the ship is required to furnish a return of such income to the Assessing Officer before the departure of the ship. However, such return can be furnished within 30 days of the departure of the ship from Indian port if the Assessing Officer is satisfied that it is not possible to submit such return before the departure of the ship and satisfactory arrangements have been made for filing of the return and payment of tax by any other person.
A port clearance certificate shall not be granted to the ship until the Collector of Customs or other officer duly authorised to grant the same is satisfied that tax has been duly paid or that satisfactory arrangements have been made for the payment of tax and filing of return within 30 days of the departure of ship from Indian port
Income of such person shall be computed as per section 44B.
2. In cases of persons leaving India [Section-174]
(1) When it appears to the Assessing Officer that any individual may leave India during the current assessment year or shortly after its expiry and that he has no present intention of returning to India, the total income of such individual for the period from the expiry of the previous year for that assessment year up to the probable date of his departure from India shall be chargeable to tax in that assessment year.
(2) The Assessing Officer may estimate the income of such individual for such period or any part thereof, where it cannot be readily determined in the manner provided in this Act.
(3) For the purpose of making an assessment under sub-section (1), the Assessing Officer may serve a notice upon such individual requiring him to furnish within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income for each completed previous year comprised in the period referred to in sub-section (1) and his estimated total income for any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply as if the notice were a notice issued under clause (i) of sub-section (1) of section 142.
(4) The tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.
3. Assessment of any association of persons, body of individuals or Artificial Juridical person formed or established only for a limited period [Section-174A]
In case an Assessing Officer finds that any association of persons, body of individuals or Artificial Juridical person has been formed or established only for a limited period or for a particular event and it is likely to be dissolved or discontinued in the same year after the accomplishment of such event or purpose, the assessment of such person can be made in same year.
4. In case of persons who are likely to transfer their assets to avoid tax [Section-175]
If it appears to the A.O. that any person is likely to sell, transfer, dispose of or to part with any of his assets with the intention to avoid payment of any tax liability, he may commence proceeding to assess the income for the period between the expiry of last previous year and the date of commencement of such proceedings.
5. In case of discontinued business [Section-176]
In case any business or profession is discontinued during an assessment year, the income of the period from the expiry of last previous year till the date of discontinuation may be assessed to tax in the current assessment year at the discretion of the assessing officer.